Inflation thus reached its highest level since the autumn of 1981. The Russian invasion of Ukraine is causing a dramatic rise in energy and raw material prices.
Inflation in Germany rose to 7.3% in March due to the war in Ukraine and rising energy prices. This is the highest level since November 1981, as the German Federal Statistical Office announced on Wednesday. Economists polled by Reuters had only expected an increase of 6.3 percent, after 5.1 percent in February.
“The fact that inflation rose to 7.3 percent in March is mainly due to the war in Ukraine, which caused the price of heating oil and gasoline to soar,” said Jörg Kraemer, chief economist at Commerzbank. . “Inflation is here to stay.” Helaba expert Ralfcircul explained that development is mainly driven by energy and food. “In addition, the price increase is also broad.”
This means that inflation is far from the two percent value that the European Central Bank (ECB) sees as ideal for the economy in the medium term. Because the Russian invasion of Ukraine is causing energy and raw material prices to rise dramatically. In March, energy prices rose almost 40% over the year. Consumers already feel this when fueling and heating.
In North Rhine-Westphalia’s most populous state alone, the inflation rate rose to 7.6% in March, the highest level since 1973. In Hesse, inflation rose to 8.0%, the highest level in 48 years old. In NRW, fuels were already almost 50% more expensive in March 2021 and heating cost almost 40% more. Edible fats and oils, with around 20%, and vegetables, with a good 14%, also increased at an above average rate. In Bavaria, inflation was only 5% if you exclude heating oil and motor fuels. Across Germany, food prices rose 6% and services 2.8%, while goods cost 12.3% more.
No relaxation expected for now
Companies also suffer from high inflation. “Companies and service providers are increasingly passing on higher oil and gas prices to customers,” said Thomas Gitzel, chief economist at BP Bank. This means that the price increase is gaining momentum. “So significantly higher wage demands must now offset inflation.” In presenting the new economic forecast from the Council of Economic Experts, economic savant Veronika Grimm emphasized in relation to inflation: “This increases the risk of a wage-price spiral”.
Because of higher costs, more companies than ever want to raise their prices in the next three months. This is the result of a survey by the Ifo Institute in Munich. “Russia’s attack on Ukraine is not only driving up energy costs but also the prices of many agricultural commodities,” said Ifo economics chief Timo Wollmershäuser. “That means the inflation rate is expected to rise to more than 5% this year.” The last time this happened in Germany was more than 40 years ago, when the inflation rate rose to 6.3% after the second oil price crisis in 1981.
German economists expect an inflation rate of 6.1% for 2022, but they also think double-digit figures are possible in the coming months if there is a Russian energy source. “You don’t even want to think about the inflationary consequences of a trade embargo,” said chief economist Alexander Krüger of private bank Hauck Aufhäuser Lampe.
(APA)